Category: Business News
The oil market is rebalancing, but no one should count on prices recovering to $100 a barrel again: that’s the message from Norway’s petroleum and energy minister.
Brent crude has surged more than 75 percent from a 12-year low earlier this year as a global glut shows signs of easing, bringing relief to oil companies and producing countries like Norway, which have been pummeled by the worst market downturn in a generation. While it’s “quite obvious” that supply and demand will return to equilibrium, it doesn’t mean Norway is planning — or even hoping — for prices to go back to what they were, Tord Lien said in a Bloomberg TV interview at the ministry’s offices in Oslo Tuesday.
“It’s better to plan for $60 and let the people who want to hope for $100, hope for $100,” he said. “We saw oil prices hitting $140 a barrel, and that does not contribute to economic growth. So therefore I’m not hoping for it.”
The collapse in crude prices has put Norway, western Europe’s biggest oil and gas producer, at a crossroads, with investments in its offshore industry falling the most since 2000 and the government for the first time dipping into its $850 billion sovereign wealth fund to plug budget holes.
State-controlled Statoil ASA, Norway’s biggest oil company, said Lien’s comment on planning for $60 was a “reasonable business model.”
“I’d be surprised if we don’t see $100 again,” Statoil Senior Vice President for Marketing and Trading Tor Martin Anfinnsen said in an interview in Oslo Wednesday. “But I hope, as Tord Lien, that we don’t get a new level of $100 or above. That would undermine the industry’s long-term perspective.”
Even as 40,000 jobs disappeared in two years, the Nordic country resisted deploying drastic measures, like tax breaks for the oil industry introduced in the U.K. The Norwegian petroleum-tax system, which includes a top tax of 78 percent but offers generous deductions for exploration and development spending, is “the best” there is and remains attractive because of its stability, Lien said.